REIT Fundraising Trends: What a Stabilizing Market Means

For several years, debt has been considered by many the star of (private markets). Rising interest rates generally made business development companies (BDCs) and debt-focused interval funds the go-to choice for many investors, while non-listed (real estate investment trusts (REITs)) struggled with redemptions and falling valuations.^1^

The logic was simple. BDCs lend to small and midsize businesses, often at floating rates. When the Fed raised rates, the interest on those loans reset higher.^2^

Nontraded REITs, by contrast, pool investor capital to buy and manage properties. Higher borrowing costs made acquisitions and refinancing more expensive. On top of that, many investors asked for redemptions. Because these funds don’t generally hold much cash, managers were largely forced to sell buildings into a soft market, often at discounted prices.^3^

Now the tide may be starting to turn. The Fed cut rates, fundraising is picking up, and redemption requests are easing.^4^ Let’s look at these recent shifts in the market — and what they might signal for (commercial real estate).^5^

REIT Fundraising Shows Signs of Life

Between early 2021 and mid-2024, non-listed REITs saw outflows of roughly $56 billion, according to Stanger & Co. During the same period, BDCs pulled in about $78 billion. ^1,2^ That period coincided with the sharpest Fed hikes in decades, prompting many investors across the market to chase debt products.^6^

This summer, however, CoStar data shows signs of a reversal. The 18 largest non-listed REITs raised $4.8 billion in the first half of the year, a 23 percent increase from 2024. Perhaps more tellingly, redemptions fell nearly 40 percent, shrinking industry net outflows from $4.2 billion to just $137 million.^7^

Ten of the largest funds reported positive net flows, up from seven the year before. That doesn’t bring the industry back to the record-setting days of 2021 and 2022, when REITs raised more than $77 billion.^8^ But it does suggest redemption pressures may be easing, and managers may have more dry powder to put to work.

Source: CoStar Group, U.S. Securities & Exchange Commission, August 2025

Rates Shape the Road Ahead

Much of what happens next depends on the Fed. In his annual address at Jackson Hole, Chairman Powell suggested the Fed may “adjust [its] policy stance” in the coming weeks — a signal many investors read as pointing to rate cuts.^9^

If more cuts arrive this year, REITs may benefit from lower financing costs and potentially recovering property values. Many analysts believe that better debt terms and a declining cost of capital might support a turnaround.

For debt products like BDCs, the dynamic could move the other way.^10^ As Kevin Gannon of Stanger & Co. told CoStar, “As rates decline, BDCs will look less favorable, and REITs will then have positive leverage.”^11^

Why This Matters to the CRE Market

For many investors and industry watchers, the latest REIT data matters less for what it is and more for what it could signal about future deal activity.

With industry net outflows down 97 percent this year, REITs may now have more flexibility to acquire properties, refinance debt, and reposition portfolios. That capacity could potentially revive transaction volume across commercial real estate, which has been muted for much of the past two years.^12^

Importantly, as Peter Linneman has argued, the flow of capital has a significant impact on CRE valuations. If new money continues entering the space while new development remains limited, demand could outpace supply.^13^ In that case, values may rise and cap rates compress, regardless of the path of interest rates.

Still, it’s important to keep in mind that outcomes can vary, as property values are influenced by many factors, and there is never a guarantee that predicted trends will play out.

Altogether, these figures are still far from the fundraising bonanza of 2021 and 2022. Even so, they may point to a healthier balance between debt and equity in private markets — a dynamic some investors see as the early stages of a new growth cycle.

For deeper data and insights into the latest CRE fundraising, redemption trends, and valuations, see CoStar’s full coverage.